Market Integration in Mozambique - International Food Policy ...

in Mozambique seems to be subsistence production, while the South imports maize from South Africa. This is striking, given
the high agricultural potential.
The data we have at hand are monthly price observation series running from January 2000 up to February 2011. Figure
1 illustrates this data for three selected markets. The first market, Maputo, is the largest city in the country SUMMARY and, by | APRIL far, the 2010
major consumption area, with a strong demand pull for white maize and only low-potential agricultural land nearby (Penzhorn
and Arndt, 2002). Lichinga is probably the most remote market we have in our data-set, tucked away in the North Western
corner of Mozambique. To the west of Lichinga, Lake Malawi forms a natural barrier to trade. To the North, the Ruvuma
River runs from Lake Malawi all the way to the Indian Ocean, demarcating the border with Tanzania. A third natural boundary
is Lugenda River that forms a south eastern barrier. The South-Western border is formed by Malawi. Chimoio lies somewhat
halfway between Maputo and Lichinga.
The high demand year around for maize in Maputo results in a price that is in general significantly higher than in the
other markets. Prices in the other two markets are generally below the prices in Maputo, consistent with a situation where
Maputo is a deficit and the other markets are in surplus areas. Despite these differences in levels, the prices clearly move
together. In addition, the further apart two markets are, the larger the average difference between the prices at any point in
time. There are also three clearly identifiable spikes. The drought in Northern Mozambique in 2001/2002 is clearly visible.
During the main 2005/2006 growing season, prices spiked, especially in Southern Mozambique, as a result of the 2004/2005
drought in the South. Natural disasters in both 2007 and 2008, including floods in four central provinces along the Zambezi
River basin in January/February and severe rainfall deficits (from January until the harvest time in April) causing drought in
certain districts of Mozambique particularly in Maputo, Gaza and Inhambane provinces are also reflected in price hikes
towards the end of 2008 and the beginning of 2009.
Figure 1: Evolution of maize prices in three markets
Table 1 provides summary statistics for all five market price series we will use in the analysis. On average, prices are
higher in the South. This is especially so for the capital city. We also find that the standard deviation is largest in Maputo.
The standard deviation seems to reduce for more remote locations. This is the opposite of what is reported in Tostao and
Brorsen (2005). Also surprising is that despite Maputo having the largest standard deviation, it has the smallest range. This
observation is consistent with Maputo being better integrated than the more remote markets. Better integrated markets may
face more volatile prices, since the price level in a market is influenced by more prices within a larger area. Poorly integrated
markets, on the other hand, experience more extreme prices, as glut or shortage signals are only slowly and partially
transmitted to other markets.
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